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67 Cards in this Set
- Front
- Back
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What is economics?
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Economics is the study of the choices people make to try to satisfy their wants in a world of scarcity.
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What are resources?
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Resources are the factors of production of a business. They are needed to produce goods and services and are needed to satisfy wants and limit people.
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What is scarcity and what does it require us to do?
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Scarcity is when a limited number of goods and services are available to meet unlimited wants. This requires us to make choices.
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What is a want?
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A want is something that you would like to have. It is not absolutely necessary, but it would be good to have.
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What are the two kinds of wants?
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1. Tangible wants are anything that can be felt by touch (Physical objects).2. Intangible wants are unable to be felt by touch (love, success).
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What do economists use to see if a decision is correct and what are they? |
Costs and benefits Costs are the negative aspects of a situation (the cons) and benefits are the positive aspects of a situation (the pros). In a good and correct decision, the benefits outweigh the costs. |
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What is a trade-off?
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A trade-off is a situation in which more of one thing means less of another (when you buy clothes, so you have less money for a car)
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Explain the concept: Global Economy
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A global economy is an economy in which actions anywhere in the world can affect everyone. An example would be if China had a revolution causing its reproduction rates to slow down, preventing it from being able to trade with the countries it usually does.
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What is microeconomics?
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Microeconomics deals with behavior and choices as they relate to small units (a business firm, small market).
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What is macroeconomics?
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Macroeconomics deals with the behavior and choices of an entire economy (taxes, gov. regulation).
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What are the four types of resources?
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The four types of resources, or the factors of production for a business, are land, labor, capital, and entrepreneurship.
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How does a nation decide what and how to produce?
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They decide with a production possibilities curve.
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What is a production possibilities curve?
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A graph that shows alternative ways to use an economy's resources. It also determines the opportunity costs and trade-offs involved in making an economic decision.
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What is an Entrepreneur?
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Someone who has developed a new idea, started a business, or fueled economic growth.
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What are the 4 types of resources and their payment?
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1. Land: natural resources (water, minerals, land, animals) Payment: rent2. Labor: physical/mental tasks and talents that people contribute to production. Payment: wages3. Capital: Human-made goods used for further production. MONEY IS NOT CONSIDERED CAPITAL! Payment: intrest4. Entrepreneurship: Developing new ideas, making businesses and industries, and fueling economic growth. Payment: Profits
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What are the three economic questions you ask of any economy?
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What goods will be produced? (to satisfy needs and wants of people)How will goods be produced? (to decide how to best use its resources)Who consumes these goods? (determined by how societies dist. income)
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What are two things economists do to decide whether a decision is correct or not?
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They always consider the costs and the benefits of a decision. If it is correct, the benefits will outweigh the costs.
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What is the invisible hand principle?
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A principle that states that if left alone, a market or economy will regulate itself. This means no government intervention.
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What are the characteristics of free enterprise/capitalism?
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-Resources owned by private individuals-Gov.'s role is small-No economic plants-No income distribution-No gov. controlled prices - the market controls them-Incentive is profit
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What are characteristics of command/socialism?
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-All resources are owned by the government-Gov. role is HUGE in the economy-Economic plans are made by the government (quotas set by gov.)-Gov. distributes the income equally-Gov. controls prices-Incentive is the common good
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What is a mixed economy?
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An economy that is not purely capitalist or socialistEx.: America has some gov. reg. provided: vital services, promotion of the general welfareEVERY ECONOMY IN THE WORLD IS ONE
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Why is competition good from a consumer perspective? (4)
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1. Better prices2. More selection3. Improved quality4. New products
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What is a demand?
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The want to purchase goods or services
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People must be ________ and ________ to purchase a good or service to demand it.
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Willing and able
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What does the Law of Demand state?
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-As the price of a good increases, the quantity demanded decreases-As the price of a good decreases, the quantity demanded increases
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What type of relationship is found in the Law of Demand between the price and quantity demanded?
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Inverse
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What is the difference between demand and quantity demanded?
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Demand is the willingness and ability to buy something, while the quantity demanded is the number of units bought at a specific price
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What does the Law of Diminishing Marginal Utility state? |
As a person consumes additional units of a good, eventually the utility (satisfaction) gained from each additional unit of the good decreases |
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What does utility mean in economic terms?
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Satisfaction
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What slope does a demand curve always have?
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Always a negative/downward slope
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What direction does the graph shift if the demand increases?
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right
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What direction does the graph shift if the demand decreases?
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left
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What are the 6 factors that shift the demand curve?
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1. Income2. Prices of related goods3. Consumer tastes/advertising4. Number of buyers5. Demographics6. Consumer expectations
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What are the 3 types of goods?
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Normal goods- demand rises and falls as income fallsInferior goods- demand rises as income falls and falls as income risesNeutral goods- demand for neutral goods remains constant as income falls and rises
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What are substitutes and what is their relationship when it comes to demand?
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A good that can easily be switched to anotherThe price of one and the demand of the other go in the same direction - when the price of one goes up, so does the demand of the other
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What are complements and what is their relationship when it comes to demand?
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A good used w/ anotherThe price of one and the demand for the other move in the same direction - they are used together, so if the price goes up for one, the demand of the other goes down
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What are examples of consumer expectations affecting the demand of a product?
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Future demands of a product can affect our demand todayIf the price of gas is gonna go up tomorrow, you get gas todayInversely, if you know there's going to be a sale in a week, you buy what you want when it's on sale and not now
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What is the difference between changes in demand and changes in quantity demanded?
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A change in demand is because demand itself changed (6 factors) and a change in quantity demanded is because of a product's price
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What is elasticity of demand?
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The relationship between percentage change in quantity demand and percentage change in price
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What are the three types of elasticity?
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1. Elastic demand2. Inelastic demand3. Unit-elastic demand
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What is elastic demand?
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When prices change, there are large changes in demand
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What is inelastic demand?
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When prices change, there are small changes in demand
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What is unit-elastic demand?
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No changes in demand when prices change
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What is supply?
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The willingness and ability to produce and sell a product
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What does the law of supply state?
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If P goes up, then Qs goes upIf P goes down, then Qs goes down
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What type of relationship is found in the Law of Supply?
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Direct
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What slope does a supply curve have?
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Positive
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What is quantity supplied?
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The number of products produced and offered to sell at a specific price
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What direction does the curve shift when supply increases?
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Right
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What direction does the curve shift when supply decreases?
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Left
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What changes when there is a movement along a curve?
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The price for a product offered to a consumer by a producer
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What are the 7 factors that alter supply?
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1. Resource prices2. Technology improvements3. Taxes4. Subsidies5. Government regulation6. Number of sellers7. Weather
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What is a subsidy?
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A payment by the government for a certain action
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How do bad and good weather impact supply?
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Bad weather decreases while good weather increases
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How are we a global economy? |
Actions in the American economy have the potential to affect everyone in the world |
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What is payment on land? |
Rent |
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What is payment on labor? |
Wages |
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What is payment on capital? |
Intrest |
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What is payment on entrepreneurship? |
Profit |
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What is a shortage? |
The condition where the quantity demanded is greater than the quantity supplied (Qd > Qs) |
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What is a surplus? |
The condition where the quantity supplied is greater than the quantity demanded (Qs > Qd) |
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What is an equilibrium? |
The condition of being balanced in a market (when Qd = Qs). Without equilibrium, a market cannot exist! |
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What are the differences between supply and demand? |
The major difference is that you must think like a business rather than a consumer. You must think of making money rather than spending money. |
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What do you supply? |
Labor |
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What is an incentive? |
Something that motivates someone to do something or take action |
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What is a public good? |
A good that is owned by the government |
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What is a private good? |
A good owned by an individual or business |
